The Government of India has increased the installation targets for Solar Parks from the present 20 GW to 40 GW by 2020.(Two years ahead of the 100 GW target of 2022). Is the outstanding success(from MNRE perspective) of the Rewa bids,where bid prices dropped to Rs.2.97/kWh for the first year(more here), a trigger for this move? What else could be the thinking for increasing this target? What is the connection to Rooftop Solar PV targets?
First, some background. After the Modi Government came to power, MNRE increased the target of grid connected solar capacity from 20 GW to 40 GW by 2022. The targets were more specific this time, both from a segment perspective and from annual target perspective. The targets were split between Ground Mounted Solar and Rooftop solar in 60:40 ratio, translating to 60 GW of the former and 40 GW of the latter. (Year-wise, segment-wise targets can be accessed here). Even within Ground Mounted Solar of 60 GW, the initial unofficial target was 40 GW of ground mounted solar under various tenders(SECI, NTPC, state policies, etc) and another 20 GW from solar parks(full list of the approved solar parks is available here).
If we remove all the details, what we will see is that the government took a portfolio approach of 3 asset classes(since all of them are based on the same technology and similar business model, they are not really different asset classes, but for the sake of this article, we will consider them as 3 different asset classes), with an asset allocation to meet the objectives as follows
- 40 GW ground mounted – Non-solar parks
- 20 GW ground mounted – Solar Parks
- 40 GW rooftop Solar
While the industry expressed disbelief when the targets were increased 5 times(at least a large part of the industry said that 100 GW is way too ambitious and unrealistic), it has mostly come around and say that the 60 GW of ground mounted targets could be achieved(40 GW for non-solar parks and 20 GW for solar parks).
Rooftop solar target is a different story altogether. Some of the reputed experts estimate that at the current rate, only around 25-30% of the 40 GW target will be met by 2022. CRISIL says that only about 12-13 GW of rooftop installations will be completed by 2022(more here), whereas Mercom predicts it to be about 10.4 GW. The challenges in Solar rooftop PV are many, starting from business continuity risk of the off-taker(in case of private sector) as well as the roof on which the PV system is installed, resistance from Discoms(since rooftop PV is attractive mostly in the commercial and industrial customers, which also happen to be the lucrative customers for discoms and who help cross-subsidize residential tariffs, Discoms cannot afford a mass migration of these customers to solar PV for obvious reasons), net-metering issues, challenges in getting very good credit-worthy offtaker(in the private sector), and more.
One of the greatest strengths of this government(in our opinion) is the speed of decision making, and pivoting whenever required. That sort of nimbleness based on facts on the ground is what is on display with the increase in the solar parks targets. On the one hand, Rewa has proven that when proper de-risking strategies facilitated by the government(deemed generation, payment security mechanism, solving land issues, and project completion timelines), investors will be more than willing to commit capital. Moreover, the scale of solar parks also enables meeting the solar capacity addition targets very quickly. One solar park in Rewa can help the government meet the 750 MW target in say 12-18 months, whereas it will take 75 Lakh PV systems of 100 kW each to achieve the same target over a longer period of time. Moreover, it is possible to drive down the tariffs heavily in Solar Parks(Rs. 3.30 currently) due to scale effect and others, but in Rooftop PV, tariffs could be almost double of what can be achieved in a solar park. Given the other challenges for solar PV rooftop installations mentioned above(including huge amount of business development efforts and time for closing a rooftop PV system deal with a private sector customer), the writing on the wall is clear.
In this context, it may not very wrong to infer that Government itself is aware that Rooftop PV may need more time to scale up(8 GW of per year for the next 5 years to achieve the 40 GW target by 2022 is a daunting task), whereas with much less effort, the same target can be achieved faster through the Solar Park route.
The result? Increase in targets from 20 GW to 40 GW by 2020. If these solar park targets are met along with the 40 GW of non-solar park utility scale projects, and at the same time Solar rooftop also on track to reach about 10 GW by 2022, around 90GW of the 100 GW could be met by 2022. Even the difference of 10 GW can be met by increasing the solar park target by increasing it from 40 GW to 50 GW.
To make is simpler, the final tally in 2022 could look something like this.
- Ground Mounted solar capacity(non-solar Parks) – 40 GW
- Rooftop Solar – 10-15 GW
- Solar Parks – 45-50 GW
- Total Achieved – 100 GW
Happy outcome for most of the stakeholders perhaps?
(This blog series is supported by Aspiration Cleantech Ventures)
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